Patent system cost the economy $0.5 trillion since 1990

Why the U.S. patent system is draining the nation's money

Jo Yong-Hak/Reuters/File
An employee of South Korean mobile carrier KT holding a Samsung Electronics' Galaxy Tab 10.1 tablet (R) and Apple Inc's iPad tablet as he poses for photos at a registration desk at KT's headquarters in Seoul. The author argues that patent lawsuits-like recent ones between Goggle, Samsung, Motorola, and Microsoft-cost the U.S. economy billions of dollars annually.

I have previously estimated that the patent system imposes at least $42 billion in net loss to the economy annually (Costs of the Patent System Revisited). As Mike Masnick notes in his Techdirt post Patent Trolls Cost The Economy Half A Trillion Dollars, a stunning new study by James Bessen, Michael Meurer, and Jennifer Ford, The Private and Social Costs of Patent Trolls, concludes that companies sued by patent trolls have lost $500 billion from 1990 to 2010, with increasing annual costs of late, on the order of $80 billion per year over the last four years.

It’s not clear how much of this cost would overlap with my conservative $42 billion annual estimate, but obviously not all of it can, as the sum is greater; and it does not even address non-”troll” wealth-destroying patent battles such as the smartphone wars between Microsoft, Google, Apple, Samsung, Motorola, RIM, and others.

My $42 billion estimate was intended to be conservative. I’d venture that even an estimate of $100 billion a year of net loss in the US economy alone due solely to patents is still conservative. That’s at least a trillion dollars of net loss in innovation and economic productivity every decade, people. A trillion here, a trillion there, pretty soon you’re talking serious money.

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